Last week, EUR/USD had consecutive big bear bars closing near their lows. Also, the 2 bars were a breakout (below a bear channel). Traders expected at least a small second leg sideways to down. The past 3 days met the minimum expectation. However, a breakout below a bear channel typically begins to reverse up within about 5 days. Today is the 7th day and so far has a small bull body.
The bigger the body today, and the more today closes on its high, the more traders will buy tomorrow, hoping for a reversal up. If today is the low, the first target will be the Nov. 18 lower high. With the sell climax as extreme as it has been, there should be a rally lasting at least a couple weeks and having at least a couple legs beginning soon. The selloff is extreme on the weekly chart as well.
A reversal could lead to a trading range that lasts a couple months.
The selloff is near the June 19, 2020 higher low, which is a magnet below. If there is going to be a reversal up for a few weeks, many traders would like it to come after testing that support.
The momentum down is strong so traders expect lower prices. But the selloff has been extreme. It is therefore climactic, and it is in a zone of support. This increases the chance of a reversal up for at least a couple weeks beginning soon.
We are near the end of the year. Major currency reversals have an increased chance of coming at the start of a year. Therefore, the pair might continue sideways to down through December.
